IoDSA FAQs

Director Induction
Frequently Asked Questions
Director Induction

1. Why do I need an induction?

Put simply, a conflict of interest arises where a director is in a situation where he or she has a personal interest which
competes against that of the company at which he or she is a director. Such conflicts may be intrinsic in nature and
present such a serious and continuous conflict that the director should resign or not take up the appointment. King III
therefore recommends that conflicts of interest should be avoided, and that certain conflicts of interest which are
fundamental should be avoided. Other conflicts (whether real or perceived) could be managed through proper process
and involves disclosure in good time and in full detail to the board and then appropriately managed.

2. Why is an induction important?

It is important for a new director to understand the nature of the company, how it operates, its people and its main
relationships. This serves to ensure that the director gains an understanding of his role as a director, of that company
as well as the framework within which the company operates. It is equally important for a new director to have an
understanding of the Board, the composition thereof, and all the Board’s processes, to be able to optimally function as
a director. For the same reason, the new director will also need to be familiar with what his roles and responsibilities
will be as a director of the company.

3. Who is responsible for the induction process?

According to Section 88(2)(a) of the Companies Act, 2008, one of the duties of the company secretary is to provide
the directors of the company with guidance as to their duties, responsibilities and powers. Chapter 2, paragraph 100
of the King Report on Governance for South Africa 2009, echoes this by stating that “the company secretary should
assist in the proper induction, orientation, ongoing training and education of directors, including assessing the specific
training needs of directors and executive management in their fiduciary and other governance responsibilities. ”

4. What should be covered during an induction?

• General
o Company profile, including its history and structure
o Company organogram
o Company’s products and services
o Company values and objectives
o Company strategic imperatives and business plan
o Individual staff members’ profile and contact details
o Company’s risk profile
o Company’s reputation and stakeholder perception
o Company’s corporate social responsibility initiatives
o Company’s insurances
o Key performance indicators

• Board
o Board procedures, including minutes, governance framework, code of ethics, board committees, board
evaluations and board calendar
o Board and board committee composition
o Board training and development
o Regulatory environment
o Board effectiveness and reviews and action plans
o Agenda for next meeting
o Details of other directors
o Details of the company secretary
o Executive Management
o Documents relating to annual general meetings
• Operations
o An operational overview of all the business areas within the company
o The company’s Memorandum of Incorporation
o Finances and performance
o Previous integrated or annual reports
o Major events in the last few years
o Legal obligations
o Ethics and compliance
o Key policies and procedures

• The role of a director

o The role of a director
o The role and legal responsibilities of a director as well as his or her statutory duties
o Responsibilities of other key role players
o Board committees that the new director may need to sit on
o Conflict of interests provisions
o The new directors personal development process

For further information, refer to a King III practice note on director induction on this link:

https://c.ymcdn.com/sites/www.iodsa.co.za/resource/collection/24CB4885-33FA-4D34-BB84-
E559E336FF4E/KingIII_Ch2_Director_Induction_March_2011.pdf